The Alabama Supreme Court’s recent decision in Brown v. Michelin North America, Inc., (Case No. CV-11-902482), provides useful guidance to manufacturers on the precautions that should be taken to safeguard proprietary manufacturing processes from potential disclosure during pretrial discovery proceedings.

The plaintiff in Brown sued Michelin for personal injuries and the death of her husband in a single vehicle accident, which she alleged was caused by the separation of the tread from one of the tires of her and her deceased husband’s SUV. During discovery, the plaintiff obtained an order compelling Michelin to submit to an inspection of its manufacturing facility. The plaintiff argued the inspection was relevant and necessary to her trial preparation, as she planned to use photographs and video recordings of Michelin’s facility at trial to explain how and at what stage of the manufacturing process alleged defects were introduced into the tire’s manufacture.

The Alabama Supreme Court expressed reservations about the relevancy of such an inspection, primarily because the tire involved had been manufactured nine years previously and Michelin had in the intervening years substantially changed its manufacturing processes. Notwithstanding its reservations, the Alabama Supreme Court acknowledged “[i]t is no doubt true that videotape and photographs of Michelin’s manufacturing processes, techniques, and equipment would likely assist Brown in presenting her case to the jury.” Id. at p. 17.

Nevertheless, despite its potential relevance, the Alabama Supreme Court overruled the trial court’s inspection order. The Supreme Court concluded any inspection of the facility would necessarily infringe on Michelin’s privilege in the secrecy of its proprietary manufacturing processes. The court set a high standard for discovery that infringes the trade secret privilege, concluding such discovery can only by justified by a demonstration of actual, rather than imagined, necessity. Necessity can only be established by demonstrating that “the discovering party would be unable to present its case ‘to the point that an unjust result is a real, rather than a merely possible threat.’” Id. at p. 18, citing Bridgestone Americas Holding, Inc. v. Mayberry, 878 N.E.2d 189, 196 (Ind. 2007).

Faced with this high hurdle, the plaintiff argued Michelin had waived the trade secret privilege by allowing other inspections, including public tours, of its facility and by producing a publicly available video titled “How Tires are Made.” Fortunately, the Alabama Supreme Court was unimpressed by the plaintiff’s waiver arguments. The court acknowledged a party asserting a trade-secret privilege must prove it has taken reasonable steps to preserve the secrecy of the matter claimed to be privileged.

Nevertheless, the court rejected the plaintiff’s waiver argument, finding Michelin had taken reasonable precautions to protect the confidentiality of its trade secrets. The court pointed to Michelin’s evidence that it permitted tours only for legitimate business reasons. Guests at the facility were required to identify themselves before entering the facility and state the purpose of their visit, and, during the duration of their tour, to wear a badge identifying their status and the scope of their access. Many visitors were required to sign secrecy agreements, and all visitors were subject to inspection for possession of cameras and recording devices. In addition, each visitor was accompanied during his or her tour and photographs and video recording are strictly prohibited.

Having rejected the plaintiff’s waiver argument, the Alabama Supreme Court thereafter concluded the plaintiff had failed to make a sufficiently compelling demonstration of genuine necessity to overcome the trade secret privilege. Pointing to the extensive knowledge and experience of the plaintiff’s tire expert and the availability of other evidence, including Michelin’s “How Tires are Made Video,” the court held “[i]t is apparent that Brown will be able to present her case and describe and explain the tire-making process to the jury even without access to Michelin’s Ardmore facility and the trade secrets it maintains there.” Id. at p. 19. The ruling is an encouraging one and serves as a guideline to manufacturers on the reasonable precautions that can and should be taken to protect the secrecy of their proprietary manufacturing processes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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